CEO pay held steady in 2003, averaging about $11.3 million

Analysis finds directors got nice boosts in fees

December 31, 2003|By BLOOMBERG NEWS

NEW YORK -The average pay for chief executive officers at 200 of the largest U.S. companies held steady in 2003 at about $11.3 million, while fees paid to corporate directors jumped as much as 15 percent, according to an analysis by compensation consultant Pearl Meyer & Partners.

Top executives' average salary rose as much as 5 percent to $1.2 million and cash bonuses increased as much as 15 percent to $2.2 million, the study said. Total CEO compensation remained about the same as last year because the value of granted stock options may be down as much as 10 percent by year-end.

"This is the first time in a long time we've seen option values go down two years in a row," said Jannice Koors, a managing director of New York-based Pearl Meyer.

Pay for CEOs nearly doubled to $11.9 million from 1996 to 2001, and dropped last year to $11.3 million after the Standard & Poor's 500 index fell 13 percent the previous year, the study said. Compensation for board members is less dependent on stock market performance.

Directors' average annual pay rose to a range of $163,352 to $178,910 this year as companies' increased oversight of accounting procedures and other performance gauges after the financial scandals that led to the bankruptcies of companies such as Enron Corp. and WorldCom Inc., Pearl Meyer said.

"This is all part of the new emphasis on corporate governance, on accountability and on boards and compensation committees being tougher," Koors said.

The biggest increases came in fees and retainers for sitting on key committees, such as auditing. Those payments were up by 20 percent to 40 percent, to as much as $23,922.

"We are seeing a fundamental shift in the way directors are being paid," Koors said. "Instead of one size fits all, directors are being paid based on their load" of work.

Overall, annual cash retainers and meeting fees for directors rose by 5 percent to 10 percent, to as much as $50,255, the study said. Stock grants and options rose by up to 15 percent to $106,720. Companies offered more restricted shares - stock that becomes available after a vesting period - than options, Koors said.

Stock options, which are valuable only if the shares rise above the option price, turned management and directors "into speculators" and prompted some companies to manipulate accounts and hide debt to boost share price in the past, Koors said.

The Pearl Meyer analysis was based on a survey of 50 large companies, recently filed company proxies and work the compensation consultant has done for its own clients. It focused on the 200 largest U.S. companies by revenue, excluding regulated industries and companies with offshore headquarters, such as Bermuda-based Tyco International Ltd.